The Parliamentary Budget Officer (PBO) today released his analysis of the Federal Cost of Minimum Sentences. This report focuses on the minimum sentence for “Possession of a prohibited or restricted firearm with ammunition”.
The Parliamentary Budget Officer (PBO) today released his distributional analysis of federal carbon pricing under the Government’s A Healthy Environment and A Healthy Economy (HEHE) climate plan.
Under the HEHE plan, the federal carbon levy is set to rise by $15 per year from $50 per tonne in 2022 until it reaches $170 per tonne in 2030. The report provides an update to previous PBO distributional analysis and incorporates the loss in economic efficiency from federal carbon pricing on household incomes.
“Incorporating economic impacts into our distributional analysis helps to provide a more complete picture of the overall impact of the federal carbon pricing system on households under the federal backstop,” says PBO Yves Giroux.
The report finds that when the economic impact is combined with the fiscal impact, that is the carbon levy and related GST paid less the rebate received, the net carbon cost increases for all households, reflecting the overall negative economic impact of the federal carbon levy under the Government’s HEHE plan.
“Under the Government’s HEHE plan, most households in Alberta, Saskatchewan, Manitoba and Ontario will see a net loss resulting from federal carbon pricing. That is, the costs they face—including the federal carbon levy, higher GST and lower incomes—will exceed the Climate Action Incentive rebate they receive,” adds Mr. Giroux.
Estimates of household net carbon costs continue to show a progressive impact, that is, larger net costs for higher income households. The report finds that the largest net cost is for households in the top income quintile in Alberta (2.8% of disposable income) and the largest net gain is for households in the lowest income quintile in Saskatchewan (2.3% of disposable income) in 2030-31.
The report also provides estimates of the impact of carbon pricing on federal budgetary revenues and program spending. “Under its HEHE climate plan, we estimate that carbon pricing will increase the budgetary deficit, other things being equal, by $0.9 billion in 2021-22 and ultimately by $5.2 billion in 2030-31,” says Mr. Giroux.
The scope of the PBO’s analysis is limited to estimating the distributional impact of federal carbon pricing and does not attempt to account for the economic and environmental costs of climate change.
The Parliamentary Budget Officer (PBO) today released his Economic and Fiscal Outlook. The report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.
The Parliamentary Budget Officer (PBO) today released his House Price Assessment. The report provides an assessment of house prices relative to a household’s capacity to borrow and pay for the purchase of a house in selected Canadian cities.
The Parliamentary Budget Officer (PBO) today released an estimated cost of the provincial and territorial aspects of the federal national child care plan announced in Budget 2021.
The Parliamentary Budget Officer (PBO) today released an independent estimate of the cost of cleaning Canada’s orphan oil and gas wells. The wells are mainly located in Alberta and Saskatchewan. Plugging wells protects underground and surface waters and avoids greenhouse gas emissions.
Provincial regulators require oil and natural gas companies to close inactive well sites. In cases where there is no known, financially viable operator capable of addressing the environmental liabilities associated with closing their wells, these wells are deemed orphaned. In Alberta, the number of orphaned wells has increased from 700 in 2010 to more than 8,600 in 2020, while in Saskatchewan it has increased from roughly 300 wells in 2015 to 1,500 in 2020. Most of this growth occurred in the last 5 years, with an average growth rate of 35 per cent per year. We estimate that more than 10,000 wells could become orphaned over the next five years, resulting in a total of almost 18,000 wells that would be deemed orphaned.
“As the number of orphan wells increase, so does the expected cost for cleaning up environmental liabilities. Our estimated cost of cleaning oil and gas wells, on a national level, is expected to rise from 361 million in 2020 to 1.1 billion by 2025” says Yves Giroux, PBO. “
In 2020, the federal government provided $1.7 billion to the governments of Alberta, Saskatchewan and British Columbia to fund the clean-up of inactive oil and gas wells, which suggests there should be sufficient funds to cover the liability. However, recent experience indicates that close to half of the funds in Alberta were disbursed to clean up wells owned by companies that are financially viable. If this trend of helping viable companies persist, existing funding could be insufficient to clean up wells that are orphaned.
The Parliamentary Budget Officer (PBO) today released his report on the Government’s 2021 Economic and Fiscal Update. The report highlights key issues arising from the Government’s Update published on December 14, 2021.
The Government released its Update on the same day that it tabled its audited financial statements for 2020-21—close to nine months after the close of the fiscal year (March 31st).
“The delay in the Government’s release of its audited financial statements has undermined parliamentarians’ ability to meaningfully scrutinize proposed Government spending,” says PBO Yves Giroux.
The PBO report notes that Canada falls short of the standard for advanced practice in the International Monetary Fund’s financial reporting guidelines, which recommends that governments publish their annual financial statements within six months.
“Consistent with the PBO’s mandate to promote fiscal transparency, I am recommending that Parliament consider legislative amendments to require tabling of the Government’s financial statements no later than September 30, which would avoid a repeat of the long delay experienced in 2021,” adds Mr. Giroux.
The PBO report includes several recommended amendments to the Financial Administration Act for consideration, including moving the required release date of the Public Accounts by three months, from December 31st to September 30th, as well as requiring Departmental Results Reports to be released no later than September 30th.
Fiscal measures since the start of the Pandemic
“Our report shows that since the start of the pandemic, the Government has spent, or has planned to spend, $541.9 billion in new measures—almost one third of which is not part of the COVID-19 Response Plan,” says Mr. Giroux.
Of the non-pandemic spending, the report identifies $69.2 billion in stimulus spending, $49.9 billion related to “building a better economy”, $24.2 billion in compensation to First Nations children and their families, and $33.3 billion in “other” measures.
The new measures announced in the Update are largely in addition to the measures included in the Liberal Party of Canada’s 2021 election platform. “We estimate that remaining platform measures would amount to $48.5 billion in net new spending over 2021-22 to 2025 26,” adds Mr. Giroux.
The Update continued to track selected labour market indicators (“fiscal guardrails”), highlighting the fact that Canada has recovered 106% of the jobs lost at the start of the pandemic.
The fiscal guardrail indicators in the Update showed that the employment rate, total hours worked and excess unemployment effectively returned to their pre-pandemic benchmarks by November 2021, well before the end of the 2021-22 fiscal year—the first year of the Government’s stimulus plan initially announced in its 2020 Fall Economic Statement.
According to Mr. Giroux, “the Government’s own fiscal guardrails indicate that stimulus spending should be wound down by the end of fiscal year 2021-22. It appears to me that the rationale for the additional spending initially set aside as ‘stimulus’ no longer exists”.
The Parliamentary Budget Officer (PBO) today released his fiscal analysis of the Government’s proposal to reduce mortgage insurance premiums charged by the Canada Mortgage and Housing Corporation (CMHC).
“We estimate that the 25% decrease in CMHC’s mortgage insurance premiums will result in a net cost of $1.4 billion to the government over five years”, says Yves Giroux, PBO.
PBO also estimates that Canadian households will have a one-time average savings of $5,341 in 2022-2023.
If implemented, it is also expected that private sector insurers will also reduce their premiums to closely match those of the CMHC, given the structure of the mortgage insurance market.
The Parliamentary Budget Officer (PBO) today released his fiscal analysis of an independent cost estimate of the Government of Canada’s procurement of two new heavy icebreakers.
The Polar Icebreaker Project, initially launched by the Government of Canada in 2008, aims to replace the Canadian Coast Guard’s existing fleet of heavy icebreakers with two new heavy icebreakers built to modern specifications.
The last Government estimate dates to 2013, at which time the cost of procurement for one ship was estimated at $1.3 billion. The Government of Canada has not yet released an updated cost estimate.
“We estimate the total cost of the icebreaker project at $7.25 billion, inclusive of project management costs of $346 million, design costs of $820 million, and acquisition costs of $6.1 billion”, says Yves Giroux, PBO.
Based on the recent experience of the Government of Canada’s shipbuilding procurement initiatives to date, as well as competing priorities at the partner shipyards, PBO assumes that construction activities for the first of the two ships will begin within the 2023-2024 fiscal year, with the second beginning in the following fiscal year. Deliveries of these vessels are anticipated for 2029-2030 and 2030-2031, respectively.
“A sensitivity analysis suggests that delays of either one or two years in the start of the construction for both vessels at each partner shipyard would increase total project costs by $235 million or $472 million, respectively”, added Mr. Giroux.
The Parliamentary Budget Officer (PBO) will be offering election campaign proposal costing services for the 2021 election. The service, available to all recognized parties represented in the House of Commons as well as parties without official recognition, is being launched today and will enable Canadian voters to make informed choices when they go to the ballot box.